Gold mining company AngloGold Ashantiannounced on Monday that it had more than trebled free cash flow generation in the first half of the year to $108-million and lowered net debt by almost a third, as costs fell and it took advantage of a higher gold price.
In its presentation of results for the six months to June 30, the company reported half-year gold production of 1.745-million ounces as being in line with the full-year guidance range of 3.6-million ounces to 3.8-million ounces.
Total cash costs were at $706/oz, a 3% improvement on the $726/oz in same period last year.
All-in sustaining costs (AISC) were $911/oz, a $13/oz improvement year-on-year.
Adjusted headline earnings of $159-million were more than double, compared to the same period last year.
Going forward, CEO Srinivasan Venkatakrishnan(Venkat)
made it clear in response to Mining Weekly Onlinethat as its current strategy had been designed to cope with all market conditions, the company would continue to improve cash flows and returns on a sustainable basis and to develop optionality within the business.
"We will continue to push hard to improve operational and cost performance as well as our overall balance sheet flexibility, regardless of the gold price environment," Venkat said.
The company’s focus remained to improve margins and grow cash flow and returns on a sustainable basis.
Production of 1.745-million ounces compared with the 1.878-million ounces in the corresponding period of last year.
The decrease in production from continuing operations was led by weaker production from Kibali and a planned decrease in head grades at Tropicana.
AISC improved by $13/oz over the first half of last year, reflecting continued cost discipline, weaker currencies and lower capital expenditure.
The South African operations reported a 3% drop in production year-on-year to 486 000 oz, alongside a 13% improvement in AISC, which declined to $958/oz from $1 098/oz in the corresponding period last year.
South Africa’s deep-level Mponeng gold mine delivered the standout performance in the region, with a 25% increase in production and a 28% decrease in AISC year-on-year.
However, while the weaker rand benefited costs, production continued to be hampered by increased safety-related stoppages, which had become a feature of the country'sunderground mining industry.
The company complained that the frequent and unpredictable nature of Section 54 stoppages and mass compliance audits by the Department of Mineral Resourceshad created an element of risk to production levels from the region, given the resultant downtime and production ramp-up periods.
The international operations delivered production of 1.259-million ounces at an AISC of $873/oz, compared with 1.378-million ounces at an AISC of $840/oz in the same period last year.
These mines, all outside South Africa, accounted for 72% of AngloGold's total production, and benefited from weaker currencies in Argentina, Australia and Brazil.
There were especially strong cost performances from Sunrise Dam and Cerro Vanguardia, which posted significantefficiency gains during the first half of 2016.
As indicated at the beginning of the year, production was lower in accordance with the plans at Geita and Tropicana, while Kibali continued to face challenges encountered inmining and processing different ore types, and the first attempt during the first quarter to test the transition to asulphide processing circuit.
Half-year capital expenditure (capex), including equity accounted entities, was $318-million, compared with $426-million, including discontinued operations, in the same period last year.
This reduction was partially due to favourable exchange rate movements, impediments in reaching investment targets caused by ongoing safety stoppages in South Africa, and the cessation of work on the underground decline access at Obuasi, in Ghana.
Capex is expected to increase in the second half of the year in line with past trends.
Negative working capital movements that inhibited free cashflow are poised to unwind in the second half of the year, specifically $28-million from the sale of metal fromArgentina, which was delayed until the week immediately following the half-year.
The overall free cash flow improvement was driven by continued efforts to contain costs and improve efficiencies, weaker currencies in key operating jurisdictions, $33-million in interest savings, and a 1% higher gold price received.
Cash inflow from operating activities decreased by $37-million, or 7%, from $513-million in the corresponding six months last year to $476-million in this half-year, reflecting a 7% drop in production from continuing operations and negative working capital movements, which included timing of gold shipments from Argentina, and movements in value-added tax receivables in South Africa.
Adjusted half-year headline earnings were $159-million, or 39c a share, compared with $61-million, or 15c a share, in the first half of last year.
Net profit attributable to equity shareholders during the first half of 2016 was $52-million compared with a net loss from continuing operations of $23-million a year earlier.
During the six months to June 30, AngloGold settled foreign denominated debt resulting in a recycling of historic foreign exchange losses of $60-million, which was added back for headline earnings.
In addition, the effective tax rate reduced from 113% to 46% as the tax charges decreased from $115-million to $51-million, largely due to the currency impact on the translation of the deferred tax balance in South America.
Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased by 2% to $781-million.
Lower production year-on-year was largely offset by cost improvements over the same period.
The ratio of net debt to adjusted Ebitda was 1.44 times, compared with the 1.47 times recorded at the end of March 2016, and 1.95 times at the end of June 2015, owing to continued efforts to sustain cash-flow improvements.
Net debt fell by 32% to $2.098-billion on proceeds received from the sale of Cripple Creek & Victor for $819-million as well as continued strong cost management, which saw improvements across most cost areas.http://www.miningweekly.com/article/anglogolds-free-cash-trebles-slashes-net-debt-2016-08-15